But Henderson cheers news, sees window of opportunity

When the president of the Henderson Chamber of Commerce heard that the sales tax across the river in Indiana would increase to 7 percent Tuesday, his reaction was immediate.

"Great!" George H. Warren exulted.

"It's certainly an opportunity for us to market the fact that our sales tax (6 percent) is lower," which could encourage sales in Henderson of products ranging from groceries to automobiles, the chamber president said.

"I think it could be significant" in encouraging Kentuckians to shop at home and coaxing Hoosiers across the river, agreed Julie Turnipseed, executive director of the Downtown Henderson Project.

"I think it could bring people over here" from Evansville and Newburgh, Turnipseed said. "They like coming to these quaint little shops anyway. The majority of the customers in these little shops are from out of town."

Indiana's move to raise its sale tax by 1 percent will have a relatively small impact on small purchases — just 20 cents on a $20 item.

But it will add $10 to a $1,000 purchase.

And the tax on a $25,000 car will be $250 higher in Indiana than in Kentucky.

"I think that would make a difference with expensive items," said Mike Thurman, a business professor at Henderson Community College.

"It should stimulate more spending in Kentucky," especially for high-ticket items such as cars bought by individuals and bulk purchases by businesses, Thurman said.

Taxation on automobile purchases is more complicated and misunderstood than most other purchases, and regulations vary from state to state.

But in the case of a Kentuckian buying a car or boat in, say, Evansville, the rules are pretty simple: "He will pay 7 percent sales tax," Stephanie McFarland, spokeswoman for the Indiana Department of Revenue, said.

That will be taken into account when the car is brought to Kentucky to be registered and licensed.

"They do get credit for the tax they paid in Indiana, so they don't have to come back and pay an additional 6 percent tax," which is the amount of Kentucky's motor vehicle usage tax, Jill Midkiff, spokeswoman for the Kentucky Department of Revenue, said.

However, that credit extends only to 6 percent; Kentucky won't refund its citizens the extra percentage point they will be paying in Indiana sales tax for a car.

"They won't get any money back," said Drew Dodson, supervisor of the motor vehicles department at the Henderson County Clerk's office, where Henderson residents license their cars.

"There would be no way to rebate money that was not paid into the Kentucky state treasury," Midkiff said.

So, she said, "They will pay 1 (percentage point) more in sales tax" to buy a vehicle in Indiana.

That could influence where Kentucky residents make large purchases.

"I think that will come into the consumer's decision to purchase an item," she said.

"And it will come into businesses that reside in a border area, how it plays into their pricing," she said.

However, Kentucky auto dealers won't gain an advantage in marketing to Hoosiers.

"If an Indiana resident buys a car in Kentucky, they'll pay the 6-percent tax there," McFarland said. "They'll come back to Indiana, and when they go register their car at the (Bureau of Motor Vehicles), we're going to credit the sales tax they paid in Kentucky up to 6 percent, but they'll have to pay an additional 1 percent to the BMV."